TIDMRNWH

RNS Number : 9050Y

Renew Holdings PLC

18 May 2021

18 May 2021

Renew Holdings plc

("Renew" or the "Group" or the "Company")

Half-year Report

Strong trading continued across H1; positive momentum going into H2

Renew (AIM: RNWH), the leading Engineering Services Group supporting the maintenance and renewal of critical UK infrastructure, announces its interim results for the six months ended 31 March 2021 ("the period").

Financial Highlights

 
 Six months ended 31 March 2021       HY2021      HY2020   Change 
                                        GBPm        GBPm 
 Group revenue(1)                  GBP366.4m   GBP313.6m    +17% 
                                  ----------  ----------  ------- 
 Adjusted operating profit(1)       GBP22.0m    GBP19.9m    +11% 
                                  ----------  ----------  ------- 
 Operating profit                   GBP18.5m    GBP16.0m    +16% 
                                  ----------  ----------  ------- 
 Adjusted operating margin(1)           6.0%        6.4%   -40bps 
                                  ----------  ----------  ------- 
 Profit before tax                  GBP18.1m    GBP15.2m    +19% 
                                  ----------  ----------  ------- 
 Adjusted earnings per share(1)        22.9p       20.1p    +14% 
                                  ----------  ----------  ------- 
 Interim dividend                      4.83p         - p 
                                  ----------  ----------  ------- 
 
 
            --   Group order book of GBP750m (HY2020: GBP690m) 
            --   Net debt (pre-IFRS16) of GBP16.9m (HY2020: GBP16.1m) 
            --   Strong organic revenue growth of 12 per cent, underpinned 
                  by performance in rail 
            --   De-risking of balance sheet with completion of Lovell Pension 
                  Scheme buy-in 
            --   Reinstatement of interim dividend reflects Group's strong 
                  cash generation and positive outlook 
 

Operational Highlights

 
 --   Acquisition of J Browne Group Holdings Limited ("Browne") 
       for GBP29.5m in March 2021, adding material scale to the 
       Group's water business in line with strategic objectives 
 --   Engineering Services adjusted operating profit of GBP22.2m 
       (HY2020: GBP20.5m) 
 --   Quantitative sustainability targets in place across five 
       key areas of the business to embed ESG strategy 
 

Current Trading & Outlook

 
 --   Trading has started strongly in the second half of the 
       year 
 --   Confident in our future prospects and well positioned to 
       capitalise on the increased investment in maintaining and 
       renewing infrastructure assets 
 

Paul Scott, CEO of Renew, commented:

"We are delighted to be reporting another set of record results for the Group and I would like to thank my colleagues across the entire business for their hard work and contributions despite the ongoing wider challenges presented by the pandemic. We remain fully committed to the safety of our workforce and those who work with us as well as the effective delivery of essential UK infrastructure services that we all rely upon. In the period, we completed the third substantial acquisition in three years and I was delighted to welcome the Browne team to the Group, an acquisition which further strengthens our position in a key attractive infrastructure sector. After reporting strong organic growth in the first half, trading has started strongly into the second half of the year and we look to the future with confidence. We are well positioned to take advantage of the UK Government's commitment to level up the economy by investing GBP640bn in an infrastructure-led recovery that will bring significant opportunities for Renew and our differentiated, diversified, low-risk business model."

(1) Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 30 of the 2020 Annual Report & Accounts.

Analyst & Investor Webinar

A virtual meeting for sell-side analysts and investors will be held at 10:15am today, 18 May 2021, the details of which can be obtained from FTI Consulting using the contact details below.

For further information, please contact:

 
 Renew Holdings plc                        www.renewholdings.com 
 Paul Scott, Chief Executive Officer          via FTI Consulting 
  Sean Wyndham-Quin, Chief Financial               020 3727 1000 
  Officer 
 Numis Securities Limited (Nominated 
  Adviser & Broker) 
  Stuart Skinner/ Kevin Cruickshank                020 7260 1000 
 FTI Consulting (Financial PR)                     020 3727 1000 
  Alex Beagley / James Styles / Sam      Renew@fticonsulting.com 
  Macpherson 
 

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

About Renew Holdings plc

Renew Holdings Group plc is a leading UK Engineering Services business, performing a critical role in keeping the nation's infrastructure functioning efficiently and safely. The Group operates through independently branded subsidiaries across its chosen markets, delivering non-discretionary maintenance and renewal tasks through its highly skilled, directly employed workforce.

Renew's activities are focused into two business streams. Engineering Services, which accounts for over 95 per cent of the Group's adjusted operating profit, focuses on the key markets of Rail, Infrastructure, Energy (including Nuclear) and Environmental which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.

Specialist Building focuses on the High Quality Residential and Science markets in London and the Home Counties.

For more information please visit the Renew Holdings plc website: www.renewholdings.com

Group Chief Executive Officer's Review

On the front foot

The Group delivered a robust trading performance over the first six months of the financial year, demonstrating the virtues of our differentiated business model and the attractive, non-discretionary structural growth drivers within our end markets. Renew is a leading provider of essential maintenance and renewals-led engineering services to UK infrastructure networks, operating in regulated markets including rail, highways, mobile telecommunications, civil nuclear, water and environmental.

Despite the third national lockdown taking effect on 6 January 2021, the restrictions did not have any material impact on trading during the period, with the Group experiencing continuity in demand for its services across all markets. This bears testimony to the resilience of our business and the essential role we perform in keeping the nation's infrastructure functioning efficiently and safely at all times.

I would again like to express my gratitude, on behalf of the Board, to our colleagues who can be proud of the way they have continued to deliver the day-to-day renewal and maintenance tasks for our clients in spite of the challenges that come with enhanced social distancing practices and personal safety requirements.

We have a proven track record of organic growth supplemented by acquisitions with attractive end markets, with strong margin and cash generation characteristics, to deliver excellent shareholder returns. Our organic revenue growth of 12 per cent during the period highlights the quality of the underlying businesses within the Group and the investments made over recent years, such as in the Rail and Highways sectors, to seize the growth opportunities in our chosen markets. This pleasing performance was complemented by the acquisition of Browne in March 2021, a water focused engineering services business based in London, which strengthens our exposure to the GBP51bn(2) water sector, adds material scale and is immediately earnings enhancing.

Thanks to the positive trading performance during the period, the highly cash generative nature of our business and our confidence in the Group's prospects, we are pleased to be able to reinstate the interim dividend.

Our strengths

Renew has a number of core strengths which provide distinct competitive advantages in our chosen markets and leave us well placed to build on our strong track record of value creation:

 
 --   We operate a differentiated, diversified, low-risk, low-capital 
       business model, providing critical asset maintenance and 
       renewals services that are not dependent on large, capital-intensive 
       contract awards 
 --   Our directly employed workforce enables us to provide a 
       more efficient and valuable service to our clients, reducing 
       our exposure to sub-contractor pricing volatility and delivering 
       extremely responsive solutions 
 --   Our businesses work in markets with high barriers to entry 
       which demand a highly skilled and experienced workforce 
       and a proven track record of safe delivery 
 --   We work in markets underpinned by resilient, long-term 
       growth dynamics and highly visible committed regulatory 
       spending periods, providing predictable cashflows 
 --   We are committed to growing the business both organically 
       and through selective complementary acquisitions whilst 
       maintaining a disciplined approach to capital allocation 
       and risk 
 --   Our high quality model of compounding earnings through 
       the redeployment of internally generated cashflows enables 
       us to execute on our strategy of delivering reliable growth 
       for all our stakeholders 
 

Market drivers

Our businesses are exposed to attractive long-term, non-discretionary structural growth drivers. Increasing demand for the maintenance and renewal of existing UK infrastructure is driven by a number of factors including:

 
 --   A commitment by the Government to level up the economy 
       by investing GBP640bn(3) in an infrastructure-led recovery, 
       with fiscal stimulus measures likely to flow through to 
       lower cost infrastructure maintenance programmes ahead 
       of capital-intensive projects; 
 --   Greater focus on sustainability and climate change, the 
       UK's net zero carbon emissions target, flood risk and investment 
       in renewables and electrification programmes; 
 --   Population growth increasing the pressure on housing, energy, 
       water and demand for natural resources; 
 --   Technological innovation driving a shift towards digital 
       roads, smart cities and the transformation of transport 
       and telecommunications networks; and 
 --   Increased Government regulation to improve safety, efficiency 
       and resilience of key infrastructure assets leading to 
       more demanding maintenance, renewal and upgrading requirements. 
 

Sustainability strategy

A long-term approach to sustainability has always been at the heart of our business and we are ideally positioned to assist in the delivery of the UK Government's committed green infrastructure investment as part of its net zero carbon target by 2050.

As part of efforts to integrate our ESG strategy within our wider business strategy and to monitor the progress we are making, we have introduced quantitative targets which will be continuously measured in the following five key areas:

   --      customer value; 
   --      climate action; 
   --      operating responsibly; 
   --      engaging our people; and 
   --      supporting our local communities. 

Renew already holds the London Stock Exchange's Green Economy Mark, which recognises companies that derive 50 per cent or more of their total annual revenue from products and services that contribute to the global "Green Economy". Renew also reports under the Streamlined Energy and Carbon Reporting ("SECR") regulations which ensure we continue to support the UK target to deliver net zero carbon by 2050.

Innovations

We continuously seek to develop and implement innovative working techniques to improve operational performance for our clients across all of our sectors. This includes the introduction of bespoke plant-led technology to deliver cost, time and environmental improvements for routine maintenance and renewal activities. An example of this in the period was our deployment of the MegaVac, a unique Road Rail Vehicle which significantly improves the capacity and efficiency of drain management operations on the rail network.

Results

During the period, Group revenue(1) increased to GBP366.4m (HY2020: GBP313.6m), including organic growth of 12%, with an adjusted operating profit(1) of GBP22.0m (HY2020: GBP19.9m). Adjusted operating profit margin(1) was 6.0% (HY2020: 6.4%) and this is expected to increase during the second half of the year. As at 31 March 2021, the Group had pre-IFRS16 net debt of GBP16.9m (31 March 2020: GBP16.1m) as a consequence of the GBP29.5m acquisition of Browne and reflecting the Group's continued focus on cash generation, tight working capital management and conservative approach to gearing. The Group's order book at 31 March 2021 was GBP750m (HY2020: GBP690m), underpinned by long-term framework positions.

As previously announced during the period, the Trustees of the Lovell Pension Scheme, in consultation with the Board of Renew, entered into a "buy-in" agreement with Rothesay Life plc. This transaction significantly de-risks the Group's balance sheet, further reduces the Group's pension exposure risks and will improve its cashflow in the medium term.

Dividend

The Group's robust trading performance, cash position and positive outlook have given the Board the confidence to declare an interim dividend of 4.83p (HY2020: nil; HY2019: 3.83p) per share. This represents a 26 per cent increase on the last interim dividend paid. This will be paid on 15 July 2021 to shareholders on the register as at 18 June 2021, with an ex-dividend date of 17 June 2021.

Engineering Services

Our Engineering Services activities account for over 95 per cent of the Group's adjusted operating profit and delivered revenue of GBP327.5m (HY2020: GBP293.1m) with an adjusted operating profit of GBP22.2m (HY2020: GBP20.5m) resulting in an operating margin of 6.8% (HY2020: 7.0%). At 31 March 2021, the Engineering Services order book was GBP665m (31 March 2020: GBP591m). The Group's strong organic growth performance was driven by continued positive momentum in our rail business, along with framework wins and operational progress across our diverse Engineering Services business.

Rail

Network Rail, a significant strategic customer for the Group, has committed an extra GBP10bn of funding specifically for maintenance and renewals as part of the current control period (CP6), which runs to 2024, during which time it will invest a total of GBP53bn(4) . This increased focus on operational support, renewal and maintenance plays to our strengths as does the Government's commitment to its rail decarbonisation programme, including a significant investment in electrification programmes, as part of the overall UK target to deliver net zero by 2050.

During the period, we secured new positions on the five-year Southern Buildings and Civils Framework and the five-year Structures Integrity Framework in the South which continues to grow our position with Network Rail.

As a major provider of multidisciplinary maintenance and renewals engineering services to Network Rail, we support the day-to-day operation of the rail network nationally, directly delivering essential asset maintenance through our long-term CP6 frameworks as well as providing 24/7 emergency response across the network. The Group now holds in excess of fifty CP6 maintenance and renewals frameworks across all disciplines, covering the entire UK rail network.

We continue to develop industry leading innovations in order to deliver value-add services within our Rail business. These include bespoke solutions built around the needs of our clients, including 'one of a kind' equipment deployed across geotechnical & earthworks, tunnels, de-vegetation and drainage.

The compelling maintenance-focused structural growth drivers within this sector, combined with Renew's high quality engineering expertise, leaves the Group ideally positioned to deliver long-term, profitable growth in Rail.

Infrastructure

Highways

The Group continued to make good operational and strategic progress within the Highways segment in the first half, delivering essential asset maintenance and critical infrastructure renewals underpinned by non-discretionary regulatory requirements.

With the UK Government committing to an investment of GBP27.4bn(5) in the strategic road network over a five-year period, as part of its second Road Investment Strategy ("RIS2"), GBP11.9bn of this funding will be ringfenced for operations, maintenance and renewals. This represents a significant market opportunity for Renew. Having acquired Carnell, a leading provider of specialist engineering services on the strategic road network, in January 2020, the business continues to leverage its innovative technological solutions to support the needs of major clients such as Highways England, for which it is one of only three suppliers working across all asset delivery areas.

During the period, Carnell continued to perform in line with our expectations and remains well placed to seize the attractive growth and market share opportunities within Highways.

Wireless Telecoms

The wireless telecoms sector contains many attractive growth drivers, from the UK Government's GBP5bn(3) investment in gigabit broadband and the accelerated roll-out of 5G connectivity through to the expansion of the Shared Rural Network, the Government's GBP500m(6) programme to extend 4G mobile coverage to 95 per cent of the UK. Our long-term relationships with the main UK network operators, managed service providers and equipment vendors offers exposure to all of these opportunities.

During the period, we built on the operational and strategic progress made previously, consolidating our position on Telefonica's and MBNL's 5G services frameworks. We also saw further progress in our work for the Government, alongside EE and BT, to remove Huawei equipment from the UK's 5G networks by 2027. We were also appointed to a new framework supporting the 5G rollout programme for Cornerstone on behalf of Telefonica and Vodafone.

With faster mobile internet connectivity becoming ever more critical in the digital age and a key part of the Government's levelling up agenda, we expect to benefit from these trends thanks to our specialist engineering expertise and mission-critical solutions.

Energy

Nuclear

The Government's total nuclear decommissioning provision is estimated at GBP124bn(7) over the next 120 years, with around 75 per cent of the total spend allocated to Sellafield which is the largest of the Nuclear Decommissioning Authority's sites and where we remain a principal Mechanical, Electrical and Instrumentation ("ME&I") services contractor.

Encouragingly, the mobilisation of work programmes and decommissioning at Sellafield continued to gain momentum during the period after the majority of operations at the site were suspended at the start of the Covid-19 lockdown in March 2020. We expect the site to be fully operational again in the second half of the financial year.

Having worked for over 75 years in civil nuclear, we deliver a multidisciplinary service through our large complement of highly skilled employees who operate to demanding nuclear standards. Outside of Sellafield, we are fully operational at Springfields and continue to develop our relationship with Hinkley Point "C".

Thermal Power, Renewables and Networks

Our essential engineering maintenance services continued at a number of the UK's thermal power stations at near normal levels. During the period we secured an extension to the SSE Hydro Tunnels Framework. We remain operational on the Minor Works Framework with National Grid as well as on the Minor Civils Framework with Western Power Distribution.

Environmental

Water

The acquisition of Browne broadens our exposure to the UK water sector, an attractive market with GBP51bn(2) committed by Ofwat to deliver service improvements as part of the current five-year investment period (AMP7) which runs to 2025. By adding material scale to Renew's water business and bringing new water clients into the Group, including Thames Water, Southern Water, Affinity Water and South East Water, the acquisition means we are now even more strongly positioned to capitalise on the long-term growth opportunities in this market, underpinned by committed regulatory spend.

As part of AMP7, additional investment is allocated to deliver supply resilience including dam safety and infrastructure refurbishment schemes. These long-term renewal programmes require sustained investment through our clients' operational expenditure budgets, benefiting Renew. In the period other water customers included D r Cymru Welsh Water, Wessex Water, Yorkshire Water and Bristol Water.

We see an attractive opportunity to drive margin-accretive revenue growth in this sector with our enhanced capabilities following the acquisition of Browne.

Land Remediation and Specialist Restoration

In Land Remediation, we have seen continuous demand for our specialist environmental services during the period. Similarly, works at the Palace of Westminster continue to be carried out at normal capacity and we have also commenced new works as part of a five-year conservation framework at this UNESCO World Heritage Site.

Specialist Building

Our Specialist Building business focuses on the High Quality Residential and Science markets in London and the Home Counties.

Revenue was GBP38.9m (HY2020: GBP20.5m) with operating profit of GBP0.8m (HY2020: GBP0.4m) delivering a margin of 2.1% (HY2020: 2.0%). The Specialist Building order book was GBP85.0m (HY2020: GBP99.0m). Work continues uninterrupted across all of our schemes including those for Defra and the MRC London Institute of Medical Science.

Health and safety

We continue to make health and safety a priority, ensuring safe working practices for the Group's employees and those who work with us.

Track record of value creation

Renew has a strong track record of sustainable value creation across the economic cycle thanks to our high-quality, value-accretive compound earnings model. Over the past five years, we have delivered:

-- adjusted earnings per share growth of 72 per cent;

-- an increase in our adjusted operating margin from 4.0 per cent to 6.0 per cent; and

-- revenue growth of 38 per cent.

Our track record of reliable revenue growth and cash generation has resulted in our ability to deliver highly predictable organic earnings growth and funding for the acquisition of complementary businesses that meet our strategic requirements.

Outlook - The growth opportunity ahead

In the context of a challenging macro-economic backdrop, we have delivered a robust set of results that demonstrate Renew's core resilience, our differentiated, low-risk, capital-light business model and the attractive growth opportunities which exist in our chosen markets, driven by long-term programmes of investment, providing visibility of spend over regulatory cycles.

We remain focused on leveraging the Group's strengths to build on our track record of good organic growth and selected M&A activity in related end markets with strong prospects, twinned with high cash generation and shareholder returns.

The acquisition of Browne further increases our exposure to a water market with an attractive long-term growth profile and highly visible cashflows. We will continue to seek opportunities in markets with similar characteristics of non-discretionary regulated investment, ongoing renewal and maintenance requirements and high barriers to entry, adopting a disciplined approach to capital allocation that is additive to our focus on delivering profitable organic growth.

Trading has started strongly in the second half of the year underpinned by a record order book and we are well positioned to take advantage of the compelling infrastructure-led growth opportunities that will play a key role in the UK's economic recovery.

Paul Scott

Chief Executive Officer

18 May 2021

 
 
   References 
 1              Renew uses a range of statutory performance measures 
                 and alternative performance measures when reviewing 
                 the performance of the Group against its strategy. 
                 Definitions of the alternative performance measures, 
                 and a reconciliation to statutory performance measures, 
                 are included in Note 30 of the 2020 Annual Report 
                 and Accounts. 
 2              Ofwat PR19 final determinations December 2019 
 3              HM Treasury Budget 2020 12 March 2020 
 4              Network Rail Delivery Plan Control Period 6 High 
                 Level Summary 26 March 2020 
 5              Department for Transport Road Investment Strategy 
                 2: 2020-2025 March 2020 
 6              UK Government press release "GBP1bn deal to end poor 
                 rural mobile coverage agreed" 9 March 2020 
 7              UK Government Nuclear Provision: the cost of cleaning 
                 up Britain's historic nuclear sites 4 July 2019 
 
 
              CONDENSED CONSOLIDATED INCOME STATEMENT 
                    for the six months ended 31 March 
                                                 2021 
 
 
                                          Exceptional 
                                                items                                              Exceptional 
                                Before            and                                   Before           items 
                           exceptional   amortisation                              exceptional             and 
                                 items             of                                    items    amortisation 
                                   and     intangible                                      and              of 
                          amortisation         assets                             amortisation      intangible        Year 
                                    of           (see          Six months                   of          assets       ended 
                            intangible           Note             ended             intangible       (see Note          30 
                                assets             3)           31 March                assets              3)   September 
 
                                  2021           2021         2021        2020*           2020            2020        2020 
 
                             Unaudited      Unaudited    Unaudited    Unaudited        Audited         Audited     Audited 
 
                   Note         GBP000         GBP000       GBP000       GBP000         GBP000          GBP000      GBP000 
 
 Revenue: Group 
  including 
  share of joint 
  venture             2        366,411              -      366,411      313,566        620,375               -     620,375 
 Less share of                       - 
 joint 
 venture's 
 revenue                                            -            -            -              -               -           - 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 Group revenue 
  from 
  continuing 
  activities          2        366,411              -      366,411      313,566        620,375               -     620,375 
 Cost of sales               (316,127)              -    (316,127)    (268,924)      (527,274)               -   (527,274) 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 Gross profit                   50,284              -       50,284       44,642         93,101               -      93,101 
 Administrative 
  expenses                    (28,284)        (3,479)     (31,763)     (28,609)       (53,453)         (6,741)    (60,194) 
 Share of 
  post-tax 
  result of 
  joint 
  venture                            -              -            -            -           (39)               -        (39) 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 Operating 
  profit              2         22,000        (3,479)       18,521       16,033         39,609         (6,741)      32,868 
 Finance income                     13              -           13            1             44               -          44 
 Finance costs                   (478)              -        (478)        (863)        (1,343)               -     (1,343) 
 Other finance 
  income 
  - defined 
  benefit 
  pension 
  schemes                            -              -            -            -            532               -         532 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 Profit before 
  income 
  tax                 2         21,535        (3,479)       18,056       15,171         38,842         (6,741)      32,101 
 Income tax 
  expense             5        (3,567)            538      (3,029)      (3,251)        (6,905)           1,146     (5,759) 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 Profit for the 
  period 
  from 
  continuing 
  activities                    17,968        (2,941)       15,027       11,920         31,937         (5,595)      26,342 
                         -------------  -------------                            -------------  -------------- 
 Loss for the 
  period 
  from 
  discontinued 
  operations          4                                          -            -                                    (5,590) 
                                                       -----------  -----------                                 ---------- 
 Profit for the 
  period 
  attributable 
  to 
  equity holders 
  of 
  the parent 
  company                                                   15,027       11,920                                     20,752 
                                                       -----------  -----------                                 ---------- 
 
 
 Basic earnings 
  per 
  share               6         22.86p        (3.74p)       19.12p       15.60p         41.22p        (14.44p)      26.78p 
 Diluted 
  earnings 
  per share           6         22.70p        (3.72p)       18.98p       15.48p         40.89p        (14.32p)      26.57p 
                         -------------  -------------  -----------  -----------  -------------  --------------  ---------- 
 
 Proposed 
  dividend            7                                      4.83p        0.00p                                      8.33p 
                                                       -----------  -----------                                 ---------- 
 

*Operating profit for the six months ended 31 March 2020 is stated after charging GBP2,148,000 of amortisation cost and GBP1,762,000 acquisition cost (see Note 3).

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 March 2021

 
                                                                Six months ended        Year ended 
                                                                    31 March          30 September 
                                                              2021           2020             2020 
 
                                                         Unaudited      Unaudited          Audited 
                                                            GBP000         GBP000           GBP000 
 
 Profit for the period attributable 
  to equity holders of the parent company                   15,027         11,920           20,752 
                                                     -------------  -------------  --------------- 
 
 Items that will not be reclassified 
  to profit or loss: 
 Movement in actuarial valuation of 
  the defined benefit pension schemes                     (27,337)              -          (2,775) 
 Movement on deferred tax relating 
  to the defined benefit pension schemes                     9,568              -              971 
                                                     -------------  -------------  --------------- 
 Total items that will not be reclassified 
  to profit or loss                                       (17,769)              -          (1,804) 
                                                     -------------  -------------  --------------- 
 Items that are or may be reclassified 
  subsequently to profit or loss: 
 Exchange movement in reserves                                (30)            (5)             (23) 
 Total items that are or may be reclassified 
  subsequently to profit or loss                              (30)            (5)             (23) 
                                                     -------------  -------------      ----------- 
 Total comprehensive income for the 
  period attributable to equity holders 
  of the parent company                                    (2,772)         11,915           18,925 
                                                     -------------  -------------      ----------- 
 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 March 2021

 
                                                 Share      Capital    Cumulative      Share                     Total 
                                                                                       based 
                                       Share   premium   redemption   translation   payments     Retained       equity 
                                     capital   account      reserve    adjustment    reserve     earnings    Unaudited 
                                      GBP000    GBP000       GBP000        GBP000     GBP000       GBP000       GBP000 
 
 At 1 October 2019                     7,533    51,904        3,896         1,339        576       27,010       92,258 
 Transfer from income 
  statement for the period                                                                         11,920       11,920 
 Dividends paid                                                                                   (5,770)      (5,770) 
 New shares issued                       322    15,024                                                          15,346 
 Recognition of share 
  based payments                                                                         (4)                       (4) 
 Exchange differences                                                         (5)                                  (5) 
                                    --------  --------  -----------  ------------  ---------  -----------  ----------- 
 At 31 March 2020                      7,855    66,928        3,896         1,334        572       33,160      113,745 
 Transfer from income 
  statement for the period                                                                          8,832        8,832 
 Share premium cost 
  reclassification                         1     (550)                                                           (549) 
 Dividends paid                                                                                       (8)          (8) 
 Recognition of share 
  based payments                                                                         249                       249 
 Exchange differences                                                        (18)                                 (18) 
 Actuarial movement recognised 
  in the pension schemes                                                                          (2,775)      (2,775) 
 Movement on deferred 
  tax relating to the pension 
  schemes                                                                                             971          971 
                                    --------  --------  -----------  ------------  ---------  -----------  ----------- 
 At 30 September 2020                  7,856    66,378        3,896         1,316        821       40,180      120,447 
 Transfer from income 
  statement for the period                                                                         15,027       15,027 
 Dividends paid                                                                                   (6,554)      (6,554) 
 New shares issued                        12       647                                                             659 
 Recognition of share 
  based payments                                                                        (30)                      (30) 
 Exchange differences                                                        (30)                                 (30) 
 Actuarial movement recognised 
  in the pension schemes                                                                         (27,337)     (27,337) 
 Movement on deferred 
  tax relating to the pension 
  schemes                                                                                           9,568        9,568 
                                    --------  --------  -----------  ------------  ---------  -----------  ----------- 
 At 31 March 2021                      7,868    67,025        3,896         1,286        791       30,884      111,750 
                                    --------  --------  -----------  ------------  ---------  -----------  ----------- 
 

CONDENSED CONSOLIDATED BALANCE SHEET

at 31 March 2021

 
 
                                                      31 March    31 March   30 September 
                                                          2021        2020           2020 
                                                     Unaudited   Unaudited        Audited 
                                                        GBP000      GBP000         GBP000 
 Non-current assets 
 Intangible assets - 
  goodwill                                             139,479     125,092        124,691 
                         - other                        34,394      26,442         23,062 
 Property, plant and 
  equipment                                             15,324      22,242         14,806 
 Right of use assets                                    17,940      10,157         17,481 
 Investment in joint 
  ventures                                                 586          39              - 
 Retirement benefit 
  assets*                                                  974      27,936         28,059 
 Deferred tax assets                                     2,233       1,462          2,164 
                                       -----------------------  ----------  ------------- 
                                                       210,930     213,370        210,263 
                                       -----------------------  ----------  ------------- 
 Current assets 
 Inventories                                             1,699       1,675          1,619 
 Assets held for resale                                  1,500       1,500          1,500 
 Trade and other receivables                           150,640     110,700        129,838 
 Current tax assets                                        911       1,334          2,174 
 Cash and cash equivalents                               1,836      31,430         13,396 
                                                       156,586     146,639        148,527 
                                       -----------------------  ----------  ------------- 
 
 Total assets                                          367,516     360,009        358,790 
                                       -----------------------  ----------  ------------- 
 
 Non-current liabilities 
 Borrowings                                                  -    (38,750)        (4,373) 
 Lease liabilities                                     (9,740)    (10,320)        (9,347) 
 Deferred tax liabilities                              (6,925)    (14,755)       (14,252) 
 Provisions                                              (441)       (452)          (441) 
                                       -----------------------  ----------  ------------- 
                                                      (17,106)    (64,277)       (28,413) 
                                       -----------------------  ----------  ------------- 
 Current liabilities 
 Borrowings                                           (18,750)     (8,750)        (8,752) 
 Trade and other payables                            (210,728)   (167,512)      (192,370) 
 Lease liabilities                                     (6,421)     (5,714)        (6,047) 
 Provisions                                            (2,761)        (11)        (2,761) 
                                                    (238,660)    (181,987)      (209,930) 
                                       -----------------------  ----------  ------------- 
 
 Total liabilities                                   (255,766)   (246,264)      (238,343) 
                                       -----------------------  ----------  ------------- 
 
 Net assets                                            111,750     113,745        120,447 
                                       -----------------------  ----------  ------------- 
 
 Share capital                                           7,868       7,855          7,856 
 Share premium account                                  67,025      66,928         66,378 
 Capital redemption 
  reserve                                                3,896       3,896          3,896 
 Cumulative translation 
  adjustment                                             1,286       1,334          1,316 
 Share based payments 
  reserve                                                  791         572            821 
 Retained earnings                                      30,884      33,160         40,180 
                                       -----------------------  ----------  ------------- 
 Total equity                                          111,750     113,745        120,447 
                                       -----------------------  ----------  ------------- 
 
              *See Note 8 for details of the Lovell Pension Scheme 
              buy-in. 
 
 

CONDENSED CONSOLIDATED CASHFLOW STATEMENT

for the six months ended 31 March 2021

 
                                                      Six months ended      Year ended 
                                                           31 March       30 September 
                                                       2021        2020           2020 
                                                  Unaudited   Unaudited        Audited 
                                                     GBP000      GBP000         GBP000 
 Profit for the period from continuing 
  operating activities                               15,027      11,920         26,342 
 Share of post-tax trading result of 
  joint venture                                           -           -             39 
 Amortisation of intangible assets                    2,810       2,148          5,529 
 Depreciation                                         4,799       4,749          9,672 
 Profit on sale of property, plant and 
  equipment                                            (80)       (308)          (483) 
 (Increase)/decrease in inventories                    (45)         245            301 
 (increase)/decrease in receivables                 (8,560)      20,647          1,465 
 Increase/(decrease) in payables                      9,565     (5,005)         17,080 
 Current and past service cost in respect 
  of defined benefit pension scheme                      25          25             69 
 Cash contribution to defined benefit 
  pension schemes                                     (252)     (2,382)        (4,817) 
 (Credit)/charge in respect of share 
  options                                              (30)         (4)            245 
 Finance income                                        (13)         (1)           (44) 
 Finance expense                                        478         863            811 
 Interest paid                                        (478)       (863)        (1,343) 
 Income taxes paid                                  (2,862)     (5,372)        (8,179) 
 Income tax expense                                   3,029       3,251          5,759 
 Net cash inflow from continuing operating 
  activities                                         23,413      29,913         52,446 
 Net cash outflow from discontinued operating 
  activities                                        (1,111)       (213)          (592) 
                                                -----------  ----------  ------------- 
 Net cash inflow from operating activities           22,302      29,700         51,854 
                                                -----------  ----------  ------------- 
 Investing activities 
 Interest received                                       13           1             44 
 Dividend received from joint venture                     -         100            100 
 Proceeds on disposal of property, plant 
  and equipment                                         483         376            725 
 Purchases of property, plant and equipment         (1,327)     (1,710)        (3,756) 
 Acquisition of subsidiaries net of cash 
  acquired                                         (29,206)    (40,512)       (40,512) 
                                                -----------  ----------  ------------- 
 Net cash outflow from investing activities        (30,037)    (41,745)       (43,399) 
 
 Financing activities 
 Dividends paid                                     (6,554)     (5,770)        (5,778) 
 Issue of Ordinary Shares                               659      15,346         14,797 
 New loan                                            10,000      49,000              - 
 Loan repayments                                    (4,375)    (23,375)        (8,750) 
 Repayment of obligations under finance 
  leases                                            (3,528)     (3,394)        (6,972) 
                                                -----------  ----------  ------------- 
 Net cash (outflow)/inflow from financing 
  activities                                        (3,798)      31,807        (6,703) 
 
 Net (decrease)/increase in continuing 
  cash and cash equivalents                        (10,422)      19,975          2,344 
 Net decrease in discontinued cash and 
  cash equivalents                                  (1,111)       (213)          (592) 
                                                -----------  ----------  ------------- 
 Net (decrease)/increase in cash and 
  cash equivalents                                 (11,533)      19,762          1,752 
 Cash and cash equivalents at the beginning 
  of the period                                      13,396      11,667         11,667 
 Effect of foreign exchange rate changes 
  on cash and cash equivalents                         (27)           1           (23) 
 Cash and cash equivalents at the end 
  of the period                                       1,836      31,430         13,396 
                                                -----------  ----------  ------------- 
 
 Bank balances and cash                               1,836      31,430         13,396 
                                                -----------  ----------  ------------- 
 

NOTES TO THE CONDENSED CONSOLIDATED ACCOUNTS

   1      Basis of preparation 

(a) The condensed consolidated interim financial report for the six months ended 31 March 2021

and the equivalent period in 2020 has not been audited or reviewed by the Group's auditor.

It does not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006. It has been prepared under the historical cost convention and on a going concern basis in accordance with applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 ("Adopted IFRSs"). The report does not comply with IAS 34 "Interim Financial Reporting" which is not currently required to be applied for AIM companies and it was approved by the Directors on 18 May 2021.

(b) The accounts for the year ended 30 September 2020 were prepared under IFRS and have been delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498(2) or (3) of the Companies Act 2006. In this report, the comparative figures for the year ended 30 September 2020 have been audited. The comparative figures for the period ended 31 March 2020 are unaudited.

(c) The accounting policies applied in preparing the condensed consolidated interim financial information are the same as those applied in the preparation of the annual financial statements for the year ended 30 September 2020 as described in those financial statements.

(d) The principal risks and uncertainties affecting the Group are unchanged from those set out in the Group's Accounts for the year ended 30 September 2020. The Directors have reviewed financial forecasts and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the condensed consolidated interim financial report.

This condensed consolidated interim financial report is being sent to all shareholders and is also available upon request from the Company Secretary, Renew Holdings plc, 3175 Century Way, Thorpe Park, Leeds, LS15 8ZB, or via the website www.renewholdings.com .

   2    Segmental analysis 

Operating segments have been identified based on the internal reporting information provided to the Group's Chief Operating Decision Maker. From such information, Engineering Services and Specialist Building have been determined to represent operating segments.

 
                                                   Group revenue from 
                                                  continuing activities 
                                                    Six months ended 
                                                        31 March 
                           Group                                                Group 
                       including         Less                               including        Less      Group revenue 
                           share        share                                   share       share    from continuing 
                        of joint     of joint                                of joint    of joint         activities 
                         venture      venture                                 venture     venture         Year ended 
                                                                                                        30 September 
                            2021         2021          2021      2020            2020        2020               2020 
                       Unaudited    Unaudited     Unaudited    Unaudited      Audited     Audited            Audited 
 
 
                          GBP000       GBP000        GBP000       GBP000       GBP000      GBP000             GBP000 
 Analysis of 
 revenue 
 Engineering 
  Services               327,514            -       327,514      293,093      577,238           -            577,238 
 Specialist 
  Building                38,897            -        38,897       20,473       43,207           -             43,207 
 Inter segment 
  revenue                (1,047)            -       (1,047)        (965)      (2,025)           -            (2,025) 
                     -----------  -----------  ------------  -----------  -----------  ----------  ----------------- 
 Segment revenue         365,364            -       365,364      312,601      618,420           -            618,420 
 Central activities        1,047            -         1,047          965        1,955           -              1,955 
                     -----------  -----------  ------------  -----------  -----------  ----------  ----------------- 
 Group revenue from 
  continuing 
  operations             366,411            -       366,411      313,566      620,375           -            620,375 
                     -----------  -----------  ------------  -----------  -----------  ----------  ----------------- 
 
 
                                                     Six months ended 
                                                          31 March 
                          Before 
                     exceptional    Exceptional                                   Before    Exceptional 
                           items          items                              exceptional          items 
                             and            and                                items and            and 
                    amortisation   amortisation                             amortisation   amortisation 
                              of             of                                       of             of 
                      intangible     intangible                               intangible     intangible     Year ended 
                          assets         assets                                   assets         assets   30 September 
                            2021           2021         2021        2020*           2020           2020           2020 
                       Unaudited      Unaudited    Unaudited    Unaudited        Audited        Audited        Audited 
                          GBP000         GBP000       GBP000       GBP000         GBP000         GBP000         GBP000 
 Analysis of 
 operating 
 profit 
 Engineering 
  Services                22,218        (3,479)       18,739       16,632         40,754        (6,741)         34,013 
 Specialist 
  Building                   786              -          786          415          1,014              -          1,014 
                   -------------  -------------  -----------  -----------  -------------  -------------  ------------- 
 Segment 
  operating 
  profit                  23,004        (3,479)       19,525       17,047         41,768        (6,741)         35,027 
 Central 
  activities             (1,004)              -      (1,004)      (1,014)        (2,159)              -        (2,159) 
                   -------------  -------------  -----------  -----------  -------------  -------------  ------------- 
 Operating profit         22,000        (3,479)       18,521       16,033         39,609        (6,741)         32,868 
 Net financing 
  expense                  (465)              -        (465)        (862)          (767)              -          (767) 
                   -------------  -------------  -----------  -----------  -------------  -------------  ------------- 
 Profit before 
  income 
  tax                     21,535        (3,479)       18,056       15,171         38,842        (6,741)         32,101 
                   -------------  -------------  -----------  -----------  -------------  -------------  ------------- 
 
 

* Operating profit for the six months ended 31 March 2020 is stated after charging GBP2,148,000 of amortisation cost and GBP1,762,000 acquisition cost (see Note 3).

   3    Exceptional items and amortisation of intangible assets 
 
                                                                   Six months ended                     Year ended 
                                                                       31 March                       30 September 
                                                                      2021        2020                        2020 
                                                                 Unaudited   Unaudited                     Audited 
                                                                    GBP000      GBP000                      GBP000 
 Acquisition cost                                                      669       1,762                       1,212 
 Total charges arising from exceptional items                          669       1,762                       1,212 
 Amortisation of intangible assets                                   2,810       2,148                       5,529 
                                                                ----------  ----------  -------------------------- 
 Total exceptional items and amortisation charge before income 
  tax                                                                3,479       3,910                       6,741 
 Taxation credit on exceptional items and amortisation               (538)       (504)                     (1,146) 
                                                                ----------  ----------  -------------------------- 
 Total exceptional items and amortisation charge                     2,941       3,406                       5,595 
                                                                ----------  ----------  -------------------------- 
 
   4    Loss for the period from discontinued operations 
 
                                              Six months ended          Year ended 
                                                  31 March            30 September 
                                                2021          2020            2020 
                                           Unaudited     Unaudited         Audited 
                                              GBP000        GBP000          GBP000 
 Revenue                                           -             -               - 
 Expenses                                           -              -        (5,590) 
                                         ------------   ------------  ------------- 
 Loss before income tax                             -              -        (5,590) 
 Income tax charge                                 -             -               - 
                                         -----------   -----------   ------------- 
 Loss for the period from discontinued 
  operations                                        -              -        (5,590) 
                                         ------------   ------------  ------------- 
 
   5    Income tax expense 
 
                                         Six months ended        Year ended 
                                             31 March          30 September 
                                            2021        2020           2020 
                                       Unaudited   Unaudited        Audited 
                                          GBP000      GBP000         GBP000 
 Current tax: 
 UK corporation tax on profit 
  for the period                         (4,075)     (2,774)        (5,732) 
 Adjustments in respect of previous 
  periods                                    531           -            216 
                                      ----------  ----------  ------------- 
 Total current tax                       (3,544)     (2,774)        (5,516) 
 Deferred tax                                515       (477)          (243) 
                                      ----------  ----------  ------------- 
 Income tax expense                      (3,029)     (3,251)        (5,759) 
                                      ----------  ----------  ------------- 
 
 
   6    Earnings per share 
 
                                                           Six months ended 31 March                   Year ended 30 September 
 
                                  2021                            2020                                            2020 
                             Unaudited                           Unaudited                                             Audited 
                  Earnings         EPS     DEPS     Earnings           EPS       DEPS           Earnings                   EPS       DEPS 
                    GBP000       Pence    Pence       GBP000         Pence      Pence             GBP000                 Pence      Pence 
 Earnings 
  before 
  exceptional 
  items and 
  amortisation      17,968       22.86    22.70       15,326         20.06      19.90             31,937                 41.22      40.89 
 Exceptional 
  items and 
  amortisation     (2,941)      (3.74)   (3.72)      (3,406)        (4.46)     (4.42)            (5,595)                (7.22)     (7.17) 
                ----------  ----------  -------   ----------  ------------  ---------  ----  -----------  --------------------  --------- 
 Basic 
  earnings 
  per share 
  - continuing 
  activities        15,027       19.12    18.98       11,920         15.60      15.48             26,342                 34.00      33.72 
 Loss for 
  the period 
  from 
  discontinued 
  activities             -           -        -            -             -          -            (5,590)                (7.22)     (7.15) 
                ----------  ----------  -------   ----------  ------------  ---------  ----  -----------  --------------------  --------- 
 Basic 
  earnings 
  per share         15,027       19.12    18.98       11,920         15.60      15.48             20,752                 26.78      26.57 
                ----------  ----------  -------   ----------  ------------  ---------  ----  -----------  --------------------  --------- 
 
 Weighted 
  average 
  number 
  of shares                     78,587   79,166                     76,405     77,016                                   77,480     78,114 
                            ----------  -------               ------------  ---------                     --------------------  --------- 
 
 

The dilutive effect of share options is to increase the number of shares by 579,000 (March 2020: 611,000; September 2020: 634,000) and reduce the basic earnings per share by 0.14p (March 2020: 0.12p; September 2020: 0.21p).

   7      Dividends 

The proposed interim dividend is 4.83p (2020: 0.00p) per share. This will be paid out of the Company's available distributable reserves to shareholders on the register on 18 June 2021, payable on 15 July 2021. The ex-dividend date will be 17 June 2021. In accordance with IAS 1 "Presentation of Financial Statements", dividends are recorded only when paid and are shown as a movement in equity rather than as a charge in the Income statement.

   8      Lovell Pension Scheme buy-in 

Renew Holdings plc's statutory accounts for the year ended 30 September 2020 noted that the following transaction took place as a post balance sheet event. On 26 November 2020, the Trustees of the Lovell Scheme, in consultation with the Directors, used scheme assets to purchase annuities which match certain pension liabilities in a transaction known as a "buy-in" where the annuity policy remains an asset of the scheme. Following the conclusion of this buy-in, all the scheme liabilities are now matched with the annuities which has removed the scheme's investment and funding risks. Consequently, there has been a reduction in the IAS 19 Retirement benefit assets in the Group's accounts for the 6 months ended 31 March 2021. The effect has been to reduce the Retirement benefit asset by GBP27,337,000, reverse the associated Deferred tax liability of GBP9,568,000 resulting in a GBP17,769,000 reduction in the Group's Retained earnings.

   9    Acquisition of subsidiary undertaking - J Browne Group Holdings Ltd 

On 26 March 2021, the Company acquired the whole of the issued share capital of J Browne Group Holdings Ltd ("J Browne") for a cash consideration of GBP29.5m plus a net cash adjustment of GBP12.0m. The GBP12.0m represents J Browne's surplus cash held in an escrow account at completion which was subsequently paid to the vendor. The net acquisition cost was funded by a combination of cash and the Group's existing revolving credit facility provided by HSBC UK Bank plc and National Westminster Bank plc.

The provisional value of the assets and liabilities of J Browne at the date of acquisition were:

 
                                    Book value   Adjustments   Fair value 
                                        GBP000        GBP000       GBP000 
 Non-current assets 
 Intangible assets 
  -goodwill                              2,673        12,115       14,788 
                         -other              -        14,142       14,142 
 Property, plant and 
  equipment                                629             -          629 
 Right of use assets                         -           317          317 
 Investment in joint 
  ventures                                 586             -          586 
                                         3,888        26,574       30,462 
                                   -----------  ------------  ----------- 
 Current assets 
 Inventories                                35             -           35 
 Trade and other receivables            12,266             -       12,266 
 Cash and cash equivalents              12,293             -       12,293 
                                        24,594             -       24,594 
                                   -----------  ------------  ----------- 
 
 Total assets                           28,482        26,574       55,056 
                                   -----------  ------------  ----------- 
 
 Non-current liabilities 
 Obligations under 
  finance leases                             -         (244)        (244) 
 Deferred tax liabilities                    -       (2,687)      (2,687) 
                                            -        (2,931)      (2,931) 
                                   -----------  ------------  ----------- 
 Current liabilities 
 Trade and other payables              (9,899)             -      (9,899) 
 Obligations under 
  finance leases                          (72)          (73)        (145) 
 Current tax liability                   (581)             -        (581) 
                                      (10,552)          (73)     (10,625) 
                                   -----------  ------------  ----------- 
 
 Total liabilities                    (10,552)       (3,004)     (13,556) 
                                   -----------  ------------  ----------- 
 
 Net assets                             17,930        23,570       41,500 
                                   -----------  ------------  ----------- 
 

Goodwill of GBP14,788,000 arises on acquisition and is attributable to the expertise and workforce of the acquired business. Other intangible assets, provisionally valued at GBP14,142,000, which represent customer relationships and contractual rights, were also acquired and will be amortised over their useful economic lives in accordance with IFRS 3. Deferred tax has been provided on this amount. Amortisation of this intangible asset will commence from April 2021.

Right of use assets and obligations under finance leases

J Browne's statutory accounts are prepared under FRS 102. The group has made an adjustment for operating leases obtained on acquisition whereby the leases are capitalised based on discounted future lease payments together with an equivalent leasing liability to be consistent with Group reporting under IFRS 16.

Fair value adjustments arising from the acquisition

In accordance with IFRS 3, the Board will review the fair value of assets and liabilities using information available up to 12 months after the date of acquisition. Fair value has been calculated using Level 3 inputs as defined by IFRS 13.

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